7.1.16 Issue #747 info@mckenziemgmt.com 1-877-777-6151 Forward This Newsletter

Kelly Lennier
Senior Consultant
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Why Bonuses Are a Bad Idea
By Kelly Lennier, Senior Consultant

Many of the dentists that McKenzie Management work with have implemented some kind of bonus plan into their practice. They think the promise of a bonus will motivate team members to excel, making them more likely to reach practice goals and enjoy success.

The problem is, that isn’t usually what happens. Instead, team members come to expect that bonus in their paycheck, and dentists feel obligated to give it to them even when the practice can’t afford it.

That’s exactly what happened to a dentist I recently worked with – perfectly illustrating why establishing a bonus system is a bad idea. “Dr. Wilson” was really struggling, with his overstaffed team collecting wages way above the industry benchmark and his overhead skyrocketing out of control.

To make matters worse, Dr. Wilson had seen a significant decrease in new patients over the last few months, leading to openings in the hygiene schedule and fewer opportunities to diagnose and recommend treatment. Production was down and things were starting to look pretty grim, to the point where he wasn’t sure how long he’d be able to keep his practice doors open.

Now at first glance, it looked like there was a bit of good news. The collections to production percentage, at 99%, was excellent. But after looking a little deeper, I found 6% of his total net production was being written off thanks to uncollectible patient balances. The industry benchmark is 2%.

The bonus plan in this particular practice was based on the ratio of accounts receivable to collections, and even though the practice was experiencing severe financial problems, this doctor’s team members still received their bonuses. This only made the situation worse, but the doctor felt as though he couldn’t take the extra money away from his employees. They expected it, after all.

If you have a bonus plan in your practice, I suggest you make it very clear that team members won’t receive a bonus when the practice is underperforming. They might be disappointed, but you can’t give them money you don’t have. Remember, your priority is to keep the practice profitable so you can meet your monthly financial obligations. If that doesn’t happen your team members won’t have to worry about a bonus; they’ll have to find a new place to work because you won’t be able to afford to keep the practice open.

Now, of course, I also recommend you stop giving bonuses all together and find other ways to reward your team members. Why? Bonus plans put the focus on money, when the focus should be on performance. Just like in Dr. Wilson’s case, if employees receive a bonus even if the practice is struggling, they have no reason to improve their performance. In fact, they’ll likely start to focus on doing what it takes to earn that bonus, rather than excelling in their roles.

Team members want to be recognized for their hard work and practice contributions, so what can you do instead of giving out bonuses? I suggest implementing a rewards program. Let team members know how they can earn both monetary and non-monetary rewards. Through this reward-for-performance philosophy, employees will develop more of an ownership attitude in the practice’s success and actively seek ways to improve their performance. They’ll be more creative and work better as a team. They’ll also feel valued, which means they’ll be happy to come to work each day – and that’s something your patients will notice.

Before you present your rewards program and objectives to your team, determine how results will be measured, what level of performance is expected, what kind of rewards you’ll offer and who will be eligible to receive those rewards.

Need a few ideas? Here are examples of rewards, both monetary and non-monetary, that you can offer your team members:

• Offer frequent positive feedback
• Send a personal note of achievement to their home
• Give out an Employee of the Month award
• Teach a team member a new skill
• Send employees home early on their work anniversary
• Give them their birthday off
• Offer extra paid vacation
• Give them gift certificates to their favorite restaurants or department stores
• Pay for continuing education courses or for a membership to an auxiliary organization

Giving out employee bonuses when the practice can’t afford it will only cause further damage. Consider getting rid of your bonus program and switching to a rewards program. If you need help getting started, contact McKenzie Management and we’ll help you through the process.

If you would like more information on how McKenzie's Consulting Coaching Programs can help you implement proven strategies, email info@mckenziemgmt.com

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